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Massachusetts' securities regulator fined Morgan Stanley $5m over its handling of Facebook's initial public offering earlier this year, saying investment bankers had "improper influence" over the research analysts covering Facebook.

Morgan Stanley was the lead underwriter of the Facebook offering, which had a bungled debut last May.

Secretary of the Commonwealth William Galvin, who has been investigating the bank's role in the IPO, said in a statement yesterday that Morgan Stanley's bankers tried to "improperly influence" research analysts by providing them with information not disclosed in the Facebook registration filing, a "clear violation of the global research analyst settlement."

Wall Street firms collectively paid $1.4bn in 2003 to settle accusations about conflicts of interest between investment banking and research departments.

Massachusetts says Morgan Stanley engaged in dishonest and unethical practices and failed to supervise employees in connection with the Facebook IPO.

A spokeswoman for Morgan Stanley could not immediately be reached.

Secretary Galvin said Facebook's finance chief alerted Morgan Stanley's senior investment banker on the first day of the IPO roadshow that he was no longer confident in the revenue guidance he had previously offered analysts.

The two talked about amending the S-1 registration filing, which was done on May 9.

The senior investment banker, however, orchestrated phone calls by Facebook's treasurer to analysts to convey specific quantitative information that was not disclosed in the S-1, according to the Massachusetts regulator. The banker "did everything but make the phone calls himself," including prepping Facebook's treasurer and drafting the treasurer's script, Secretary Galvin said in his statement.

Retail investors were left to interpret less specific information in the S-1, Secretary Galvin said. Research analysts' revised forecasts were only made available to professional investors, he said.

In October, Massachusetts fined Citigroup $2m for supervision failures. Citi dismissed its star internet analyst, Mark Mahaney, and a junior analyst for violating disclosure rules about two companies he covered, Facebook and Google.